Global hoteliers look east as recession bites

Tamara Walid

4 Min Read

DUBAI (Reuters) - Global hoteliers are pinning their hopes on the east’s underserved leisure markets to offset falling revenue as holidaymakers and business travelers cut back to save money in the global downturn.

But growth from emerging markets will take time and the new locations still only make up a small proportion of hoteliers’ overall businesses, analysts said.

“Worldwide, our major locations right now where most of the growth is, are China, India and the Middle East,” Ed Fuller, president and managing director of Marriott Lodging International told Reuters last week at a travel industry event in Dubai.

China, the world’s fastest-growing economy, is expected to expand 6.5 percent this year, according to the International Monetary Fund. That’s a slowdown from 9 percent growth last year but way ahead of the 2.8 percent contraction forecast for the United States in 2009.

U.S.-based Marriott, which manages the Ritz Carlton and Renaissance brands, plans to open 130 hotels in the next four years outside North America, where it manages 350 hotels. Half of the openings will be in China, India and the United Arab Emirates.

Accor, Europe’s largest hotelier, said at the same event that it plans to more than triple the number of its hotels in the Middle East.

France-based Accor, which has 25 of its budget Ibis hotels in China, plans to open 20 more this year and about 10 per year over the next few years.

Many global hoteliers posted declines in occupancy rates and revenue per available room - a key performance measure - in the first quarter as U.S. and European travelers stayed at home.

Patrick Scholes, an analyst at U.S.-based FBR Capital Markets said, said many hotel groups are looking to tap into expected higher economic growth rates in emerging markets. But offsetting weak home markets with growth from China, India and the Middle East will take time, he said.

“The exposure of companies such as Marriott or Starwood to countries like India or China still represents a small portion of their overall business,” said Scholes. “The portion certainly is growing ... but it’s still a very small portion in the overall pie.”

For Intercontinental Hotels, the world’s largest hotelier, China represents approximately 5 percent of the group’s business, Scholes said, adding that in two years this will grow to 15 percent.

Scholes sees the biggest growth for companies such as Marriott, Intercontinental Hotels and Starwood coming from China, while growth from India will be slower.

“India is more of a complicated market with higher land prices ... and more complicated with property ownership laws as opposed to China, Middle East or the States. It’s a little bit higher a barrier to entry market,” he said.

Robert O‘Hanlon, tourism, hospitality and leisure partner at consultant Deloitte Middle East said: “There is genuine belief that markets like China and India are underserved and in terms of business tourism and hospitality tourism there are opportunities for growth.”

Growth in the Middle East and Central Asia could slow to 2.5 percent in 2009 from 6 percent in 2008, the IMF said on Sunday.